3 Dividend Stocks for November 2023

David Harrell: Hi. I’m David Harrell with Morningstar Investment Management. In this monthly video series, we take a look at the dividend prospects of three stocks that are popular with income investors.

I’ll start with two utilities that are the top picks within the sector from Morningstar equity analysts.

3 Dividend Stocks for November 2023

1. Entergy ETR
2. NiSource NI
3. American Tower AMT

The first is Entergy, a holding company with five regulated integrated utilities that generate and distribute electricity to customers in Arkansas, Louisiana, Mississippi, and Texas, and is one of the country’s largest power producers. The utility currently yields 4.7% and trades at a discount of around 20% to its Morningstar fair value estimate.

Entergy held its dividend flat from 2010 to 2015 and then began raising its payout by $0.08 per share (about 2%) each year. But the utility provided consecutive increases of 6% in 2021 as well as 2022, and it just declared a 5.6% increase at the end of last month. Morningstar analysts expect ongoing increases to track earnings growth, which they forecast at 7% over the next five years.

Another utility pick from the analysts is NiSource, one of the largest natural gas distribution companies in the United States. Its electric utility transmits and distributes electricity to 500,000 customers in northern Indiana. NiSource currently yields 4.0%, with a 6.1% annualized dividend growth rate over the past five years. That rate of growth should continue, as Morningstar analysts expect dividend growth to “remain near 6% with a payout ratio of around 60% for at least the next three years.” While this is a higher payout ratio than many of its peers, Morningstar analysts believe that NiSource “has enough financial flexibility and constructive rate regulation” to support a payout in that range. The stock trades at a discount of more than 20% to its fair value estimate.

Last up this month is American Tower, which owns and operates more than 220,000 cell towers in the U.S., Asia, Latin America, Europe, and Africa. It also owns and/or operates 28 data centers in 10 U.S. markets. Structured as a real estate investment trust, American Tower has provided strong dividend growth over the past five years, at an annualized rate of 17.5%, having raised its dividend with almost every quarterly payout since 2012. However, Morningstar analysts expect a somewhat lower growth rate, in the low double digits going forward, as the REIT pays down debt. The stock currently trades at a 20% discount to its fair value estimate and yields 3.6%. Management touted its devotion to the dividend during its most recent earnings call, committing to an annualized dividend growth rate of 10%.

I’m David Harrell with Morningstar Investment Management. Thanks for watching and we’ll see you next month.

Watch “3 Dividend Stocks for October 2023″ for more from this series.